The Hartford 2009 Annual Report Download - page 179

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
F-30
4a. Fair Value Measurements – Guaranteed Living Benefits Program (continued)
Roll-forward of Financial Instruments related to the Guaranteed Living Benefits Program Measured at Fair Value on a
Recurring Basis for the twelve months from January 1, 2008 to December 31, 2008
Changes in unrealized
gains (losses)
Fair value Total realized/unrealized Purchases, included in net income
as of gains (losses) included in: issuances, Transfers in Fair value related to financial
January 1, Net income and and/or (out) as of instruments still held at
2008 [2] OCI [3] Settlements [5] of Level 3 December 31, 2008 December 31, 2008 [2]
Variable annuity hedging
derivatives [6]
Levels 1 and 2 $ (12) $ 1,363 $ — $ (1,324) $ — $ 27 [7]
Level 3 655 2,011 — (29) — 2,637 $ 1,893
Total variable annuity hedging
derivatives
643 3,374 — (1,353) — 2,664
Total reinsurance recoverable for
GMWB [1] [2] [4]
238 962 — 102 — 1,302 962
U.S. guaranteed withdrawal
benefits [2] – Level 3 (1,433) (4,967) — (126) — (6,526) (4,967)
International guaranteed
withdrawal benefits Level 3 (17) (82) 11 (6) — (94) (83)
Total Guaranteed withdrawal
benefits net of reinsurance and
hedging derivatives (569) (713) 11 (1,383) — (2,654)
Macro hedge program [6]
Levels 1 and 2 — (11) — 11 — — [7]
Level 3 18 85 — 34 — 137 102
Total macro hedge program 18 74 — 45 — 137
International other guaranteed
living benefits Level 3
(22) 25 (1) (2) — — 25
[1] The January 1, 2008 fair value of $238 includes the pre-transition adjustment fair value of $128 and transitional adjustment of $110.
[2] The Company classifies all the gains and losses on GMWB reinsurance derivatives and GMWB embedded derivatives as unrealized gains/losses
for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains/losses for these
derivatives and embedded derivatives.
[3] All amounts are before income taxes and amortization of DAC.
[4] During July 2008, the Company reinsured, with a third party, U.S. GMWB risks associated with approximately $7.8 billion of account value sold
between 2003 and 2006. The reinsurance agreement is an 80% quota-share agreement. The third party’s financial strength is rated A+ by A.M.
Best, AA- by Standard and Poor’s and Aa2 by Moody’s. The reinsurance agreement is accounted for as a free-standing derivative.
[5] The ‘Purchases, issuances, and settlements’ primarily relates to the receipt of cash on futures and option contracts classified as Level 1 and
interest rate, currency and credit default swaps classified as Level 2.
[6] The variable annuity hedging derivatives and the macro hedge program derivatives are reported in this table on a net basis for asset/(liability)
positions and reported on the consolidated balance sheet in other investments and other liabilities.
[7] Disclosure of changes in unrealized gains (losses) is not required for Levels 1 and 2. Information presented is for Level 3 only.